According to an IRS announcement on its website, the competent authorities of U.S. and the Isle of Man have concluded an arrangement on the exchange of Country-by-Country Reports. The competent authority arrangement (CAA) for exchange of country-by-country reports is on the basis of a tax information exchange agreement (TIEA). The agreement was signed on 20 July 2017.
Under the arrangement, both countries intend to increase international tax transparency and improve access by their respective tax authorities to information regarding the global allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions. The country-by-country report is an annual report filed by large multinational groups to be used by tax administrations. The CbC Report is one element of a standardized approach to transfer pricing documentation with a view to assessing high-level transfer pricing risks and other base erosion and profit shifting related risks, as well as for economic and statistical analysis.
The first fiscal year for which the U.S. and Isle of Man intend to exchange CbC Reports is for the fiscal years of MNE Groups commencing on or after January 1, 2016. The CbC reports are intended to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC Report relates. CbC Reports with respect to fiscal years of MNE Groups commencing on or after January 1, 2017 are intended to be exchanged as soon as possible and no later than 15 months after the last day of the fiscal year of the MNE Group to which the CbC Report relates.
The Competent Authorities intend to exchange the CbC Reports automatically through a common schema in Extensible Markup Language (XML).